How Does the Decoy Effect Affect Decision-making and How We Can Prevent It?

Abstract

Scientists have been interested in the psychological aspects of economic life since the 18th and 19th centuries. As a result, behavior economics is used to better understand human behavior using economic methods. It began in the twentieth century, thanks to George Katona, who proposed a link between economics and psychology [1]. Thanks to Daniel Kahneman, who offered a prospect theory that challenged “bounded rationality” later in the century, it began to shed more light [2]. Previous studies relied on data and experiments that examined rationality in general [3]. To concentrate on specific decision-making habits, this paper will rely on market data. The decoy effect is the one topic this paper will talk about. which wants to inform more people about how the decoy effect affects market behavior. The research is really meaningful in looking into how consumers make irrational decisions. The findings revealed that the decoy effect influences customers to buy goods that seem superior to the alternatives available to them. As a result, it is recommended that customers should weigh their options before making a purchase, determine which quality is most essential to them, and select products accordingly